The Hyperliquid Policy Center is pressing the US Securities and Exchange Commission to sharpen its proposed crypto regulatory framework, arguing that unresolved rules around token airdrops, decentralized trading, and buyback mechanisms could leave developers facing unnecessary legal uncertainty. In a comment letter dated October 19, the advocacy group endorsed the SEC's broader Regulation Crypto Assets proposal but called for five targeted revisions that could influence how crypto projects launch, distribute, and manage their tokens in the United States.
At the center of the debate is how securities regulations should apply to token distributions that do not involve a conventional purchase. HPC wants the SEC to clarify that airdrops should not qualify as securities transactions when recipients provide no tangible consideration in exchange. Under its recommendation, routine administrative steps such as connecting a wallet or completing sanctions screening would not automatically count as payment. The distinction could matter for projects distributing tokens to communities without requiring recipients to purchase them, although the recommendation would not itself establish a new legal exemption.
The group is also seeking clearer boundaries for secondary-market trading. Its proposal addresses whether decentralized protocols and other intermediaries can facilitate transactions involving tokens distributed under the SEC's proposed exemptions. Without clearer guidance, projects could face uncertainty not only when issuing tokens but also when building the infrastructure that allows those assets to trade. For decentralized finance platforms, the eventual treatment of these activities could shape how services are structured and what compliance obligations may apply.
Another requested change concerns projects whose development is still underway. HPC wants the proposed safe harbor expanded so that qualifying projects can continue developing without being required to acknowledge that their tokens previously constituted investment contracts. The group also argues that regulators should distinguish automated token buybacks governed by predefined rules from discretionary purchases directed by developers or centralized entities. That distinction could become important when assessing whether a buyback mechanism operates according to transparent, predetermined conditions or depends on decisions made by a project team.
HPC's fifth recommendation focuses on the relationship between federal and state securities requirements. The organization is calling for permanent federal preemption of certain state registration obligations, warning that projects qualifying for the proposed safe harbor could otherwise encounter additional requirements at the state level. Its concern is that inconsistent obligations could undermine the predictability the federal framework is intended to provide and make the United States a more complicated environment for crypto development.
The SEC's proposal, introduced in August, would allow qualifying projects to raise up to $5 million over four years under a startup exemption or up to $75 million annually through a separate fundraising exemption. It would also establish a safe harbor for certain tokens no longer associated with investment contracts and provide relief from some state securities registration requirements. With the public comment period scheduled to close on October 20, HPC's recommendations arrive at a consequential stage in the consultation process.
The outcome will depend on which revisions, if any, the SEC incorporates into its final framework. Clearer treatment of airdrops, trading infrastructure, and automated buybacks could give developers a more predictable basis for designing token-related activities, while the scope of federal protections could influence where projects choose to operate. For now, however, HPC is advocating changes rather than announcing a shift in existing law. The practical impact will only become clearer once the regulator defines the final rules and their conditions.
